News / India's industry suffers as China slows down, but may reap rewards later

India’s freight forwarders are feeling the effects of the coronavirus outbreak and China’s extended supply chain slowdown.

Karthi Baskar, deputy managing director of Kintetsu World Express (India), said shipments from China had been heavily delayed.

“All air cargo capacity is downsized due to the cancelled passenger flights, and there’s only limited freighter capacity available,” he told The Loadstar.

“All raw materials for manufacturing are on hold, which will obviously affect supply.”

China accounts for around 14% of India’s imports and, in terms of manufacturing, the most exposed industries – electronics, pharmaceuticals and auto manufacturers – rely heavily on China for components and raw materials.

For example, the price of paracetamol has jumped 40% in India, according to Bloomberg, and the country faces shortages of finished drugs if supply chains aren’t restored by the first week of March. China supplies some 80% of India’s active pharmaceutical ingredients required for production.

Similarly, mobile phone manufactures have warned production may stop unless shipments of Chinese-made components, such as semi-conductors, can resume soon.

According to Fitch Solutions, India’s vehicle production may shrink 8.3% this year, as China supplies between 10-30% of India’s automotive components.

“The numerous shipping line blank sailings will impact all Indian manufacturing companies and create a shortage of raw and semi-finished products,” added Mr Baskar.

He said India’s exports to China were also affected.

“In terms of air exports, there has been good volumes of pharmaceuticals, such as sanitisers and face masks, but few other commercial shipments – there’s no space and rates have gone up by 200%.”

Jiss Mathew, director of Global logistics Solutions India, said the supply chain disruption could have a “devastating financial impact” on the logistics industry.

“As an industry already facing a major cash crunch, this situation will significantly affect companies that are less financially stable, due to the inability to sustain their business, in the absence of revenue even for a month.

“In the past, we have seen airlines go bankrupt when strikes of 3-4 days have caused cash flow issues. The current situation can result in some shipping, freight companies going into oblivion.”

Meanwhile, Mr Mathew highlighted the supply chain diversification likely to take place after the crisis.

“It may seem that China’s position as a factory to the world cannot be reversed. However, given the current virus crisis of unimaginable magnitude, a significant shift in trend can be expected across the world.”

For example, he said, Indian, Bangladeshi and Vietnamese manufacturers were “flush with enquiries” for garments and textiles from buyers that previously relied only on China.

“India especially stands to gain, given its ability to cater to the entire value chain of garment manufacturing, from procuring yarn to building facilities,” added Mr Mathew.